TP03/015
The Panel advises that it has decided the four applications in relation to the affairs of Anaconda Nickel Limited (Anaconda) which were outstanding.
The Panel's primary decision is that the Panel has decided to revoke the relief granted by ASIC to MatlinPatterson Global Opportunities Partners LP (MP Global) which would allow MP Global to acquire shares issued on conversion of rights in Anaconda which MP Global might acquire under its offer for the Anaconda Rights.
The Panel has declined the other applications.
The Panel considers that the relief, combined with the terms of the MP Global off market offer for the Anaconda Rights (Rights Offer) and MP Global's off market takeover bid for shares in Anaconda (Share Offer), would allow MP Global to decide, selectively, the number of new shares in Anaconda it would acquire and the number of new shares that it could require Glencore to subscribe for as underwriter. The Panel on that basis decided that the ASIC relief should be revoked.
In its considerations of the current Anaconda 02-05 applications, the Panel was aware of the schemes of arrangement that Anaconda Nickel Holdings and Murrin Murrin Holdings had entered into with various creditors. One of the factors in the Panel's decision, in considering the interests of current Anaconda shareholders, was the consequences of any decision it made on the prospects of the schemes, and therefore the solvency of Anaconda.
Discriminatory Acquisition
The Panel decided that the Rights Offer was essentially an offer for control of Anaconda by way of acquiring the Anaconda shares issued on exercise of the Rights. The structure and timing of the Rights Offer, Share Offer and the Rights Issue, when considered in light of the relief granted, allowed MP Global to discriminate, selectively, against Glencore International AG (Glencore) who is likely to be required to acquire shares as underwriter of the Rights Issue.
The discriminatory aspect arises because, if MP Global acquires rights and shares which would entitle it to more than 50.1% of the voting rights of Anaconda (which is its stated objective), it would have the choice and ability to exercise some rights and to allow some other of those rights to lapse, while remaining certain it would remain in control of more than 50% of Anaconda. Any rights which MP Global did not exercise would, under the Underwriting Arrangements fall through to Glencore to subscribe for under its underwriting obligations. Thus, MP Global could, by its choice of the number of rights it exercises and the number of rights it allows to lapse, selectively determine its maximum holding of shares in Anaconda and cause Glencore to be obliged to subscribe for the shares arising from the rights MP Global chose not to exercise.
Independent Expert Condition
The applications dealt in part with the Independent Expert Condition in MP Global's offers that Anaconda provide access to an expert to confirm various production capabilities of the Murrin Murrin mine project. The Panel has decided that the condition is not unacceptable. MP Global was free to make its bid subject to such a condition if it believed that it needed the type of assurances in the condition. However, the Panel decided that there was no prima facie obligation of the directors of Anaconda to provide that access. The Panel considered that the Anaconda directors are obliged to consider carefully whether or not to grant MP Global access, but their decision will be influenced by a range of issues. Those issues may include contractual obligations to third parties as to Anaconda's operations, confidentiality and other undertakings proffered by a bidder, as well as the value that may be lost to the shareholders if an offer fails because the directors decline to provide access or information in cases such as this.
The Panel has made an interim order directing MP Global to advise the market by 6.00 p.m. AEST Monday, 10 February 2003, the status of the condition and whether it will waive the condition or not. Given the timing issues in the Rights Offer the Panel considers its requirement of MP Global now is closely analogous to the requirement of a bidder under a takeover offer to disclose the status of conditions in its offer under section 630(2) of the Corporations Act.
General Policy Position
The Panel is concerned to emphasise that its decision is specifically related to the facts of the Anaconda situation. It is not a proposition, in conflict with section 617 of the Act, that a bidder must bid for all of the shares that may be issued by a target company i.e. an extended equal opportunity principle. Rather, the Panel's decision is a decision on the principle that selective treatment of different persons is unacceptable (albeit in this case a person who may only have acquired their shareholding after the bid commenced). Section 617 allows a bidder to choose whether or not to include in its offer, shares which are issued during the period of its bid.
Glencore's Underwriting
The Panel recognizes that the harm that it sought to prevent, i.e. Glencore being selectively treated, depended upon a failure of Glencore to include what appears to the Panel to be basic protections for its commercial position. Glencore would have been perfectly entitled to include in its underwriting agreement a condition that it was only prepared to subscribe a large amount of money in Anaconda if no other person gained control of Anaconda, in which case the current circumstances were unlikely to have arisen. Glencore did not take this precaution.
Anaconda Information to its Shareholders
The Panel is concerned at the lack of information provided to Anaconda shareholders by Anaconda. The short letter which Anaconda has so far provided to its shareholders makes no assessment of the merits of the offer in terms of the value offered, or Anaconda shareholders' alternatives. The Panel considers that Anaconda shareholders are entitled to such advice from their directors.
In a fast moving situation such as a Rights Offer, the Panel considers that Anaconda's advice merely that the offer was "highly conditional" fell short of the standard required. By the time the MP Global offers became unconditional, if they were to, it is highly unlikely that Anaconda would have any time to write to its shareholders, let alone for them to consider such advice. On that basis, the Panel considers that the Anaconda directors should be writing to their shareholders now, advising, as best they can, on valuation issues. Once the Independent Expert Condition is determined or waived, the MP Global offers will, rather than being "highly conditional", be subject to a small number of conditions which are very common in takeovers in Australia.
In the recent letter from the directors of Anaconda to Anaconda shareholders, they raised the prospect of the MP Global Rights Offer and Share Offer jeopardising the prospects of the Anaconda Nickel Holdings and Murrin Murrin Holdings schemes of arrangement. No evidence has been produced to the Panel to substantiate this.
Alternative Routes
The Panel has sought to reach a sensible commercial resolution between the parties in the last few days. That has not been achievable, despite exploring a number of alternatives with parties at different times.
One resolution which the Panel would have been prepared to accept is an agreed resolution where, amongst other things, MP Global had undertaken to exercise all of the rights it acquired under the Rights Offer. That would have resolved the Panel's concerns about the selectivity of the way the Rights Offer and the relief operated. It would not have required an offer for all of the shares Glencore received as underwriter. However, for various reasons, the parties were unable to reach agreement.
The Panel recognises that it is potentially open for MP Global to proceed with its Rights Offer and Share Offer without the ASIC relief. On that basis, MP Global would be entitled under the provisions of the Act to acquire shares in Anaconda under its Share Offer and exercise sufficient Rights to maintain its percentage holding in the fully diluted Anaconda. The Panel recognizes that this would be much less certain for MP Global, although potentially achieving the same result and effect. To go via this route, MP Global would have to decide at the close of the Rights Issue on 14 February, how many rights it would be entitled to exercise, based on what percentage of the current shares in Anaconda it had received acceptances for at that date. In contrast, under the relief, MP Global would be entitled to exercise all rights it received under the Rights Offer. The Panel expresses no views on such a course of action.
Other applications
The Panel decided to decline the other aspects of the Anaconda applications 02 - 05.
Consequences
The Panel has advised ASIC that it would not consider it unreasonable, or unacceptable circumstances, for MP Global to seek to withdraw its offers in light of the Panel's decision.
The Panel will publish its reasons for its decision in due course.
The President of the Panel appointed the Anaconda 01 Panel, Brett Heading, Tro Kortian and Peter Scott, to consider all of the Anaconda applications.
Nigel Morris,
Director, Takeovers Panel
Level 47 Nauru House,
80 Collins Street,
Melbourne VIC 3000
Ph: +61 3 9655 3501
The Anaconda applications were as follows:
Anaconda 01: an application received on 21 January from MP Global seeking interim orders preventing Glencore from acquiring rights in the 14-for-1 pro rata renounceable rights issue to be made by ANL under a prospectus dated 20 January 2003 (Rights Issue). This application has been withdrawn with the Panel's consent.
Anaconda 02: an application received on 28 January from Metal Holdings P/L (Metal Holdings), a company associated with Mr. Andrew Forrest, seeking a declaration of unacceptable circumstances, and final orders, in relation to the affairs of Anaconda. Metal Holdings alleges that the underwriting agreement with Glencore should have been treated as a related party transaction and should not proceed without approval by shareholders not associated with Glencore.
Anaconda 03: an application received on 29 January 2003 from MP Global seeking a declaration of unacceptable circumstances, and final orders, in relation to the affairs of Anaconda. The application is in relation to:
- the underwriting arrangements with Glencore International AG (Glencore) in relation to the Rights Issue, its terms and the possible effect of the Rights Issue and Underwriting Arrangements on control of Anaconda;
- failure of Anaconda and MP Global to reach agreement on access for an independent expert (of Anaconda's own choosing) to the Murrin Murrin Project so as to enable the satisfaction of the Independent Expert Condition of the MP Global bidder's statement;
- failure of Anaconda and MP Global to reach agreement on methods to ensure the ongoing solvency of Anaconda in the event that Anaconda was no longer certain of Glencore being obliged to perform all obligations under the Underwriting Arrangements; and
- the issue of treatment by Anaconda of MP Global and Glencore (as competing bidders for control of ANL).
The application seeks final orders by the Panel to require Anaconda and, to the extent necessary, Glencore to either:
- give an independent expert access to the Murrin Murrin Project to allow the satisfaction of the condition of MP Global's bidder's statement; or
- agree to a compromise proposed by MP Global in substitution for the satisfaction of the condition referred to in the previous paragraph.
Anaconda 04: is an application received on 29 January 2003 from Glencore seeking review of the relief ASIC granted to MP Global to allow it to make its offer for the Anaconda Rights concurrently with its offer for Anaconda shares, and to acquire the shares issued on exercise of any rights it acquires under its rights offer. Glencore asserts that the offer for the rights allows Anaconda shareholders insufficient time to consider the rights offer. Glencore asserts that it is unacceptable for the share offer not to extend to shares issued on lapse of any rights not exercised. Glencore asserts that the relief should not be granted, or should require MP Global to:
- exercise all rights it acquires under the bid,
- close its bid sufficiently early for rights holders to decide whether to exercise their rights, allow them to lapse, sell them, or accept the MP Global offer, and
- offer for all shares which may be issued under the rights issue or underwriting.
Glencore has requested that the Panel make an interim order restraining dispatch of the rights offer document. The Panel understands that the document has been posted onto ASX and some documents have been posted. MP Global has undertaken not to dispatch any more documents for a period to allow the Panel to consider the request for the interim order.
Anaconda 05: is an application received on 29 January 2003 from Anaconda. It asserts that unacceptable circumstances exist in relation to:
- MP Global's offer and conditions,
- the issues concerning the Independent Expert Condition,
- the future solvency of Anaconda,
- the ability of MP Global to affect the percentage shareholding in Anaconda that it achieves if its bid succeeds,
- the timing of the Rights Offer, and
- MP Global's intentions.
